Zhang Peisen, a senior researcher with the Taxation Research Institute, said the country's tax revenue is expected to grow 13 percent, in spite of SARS (severe acute respiratory syndrome) and the US-led war on Iraq.

China's tax revenue rose a year-on-year 12.1 percent to 1.70 trillion yuan (US$204 billion) in 2002, figures from the State Administration of Taxation indicate.

"China will witness faster growth in private investment this year,'' Zhang said.

Foreign direct investment will also grow steadily, he added.

Consumer booms in housing, cars and education will continue to boost total spending, he said.

China's foreign trade, although recording a deficit of US$1 billion in the first quarter of this year, will be in surplus for the whole year.

"The Chinese economy is expected to grow by 7.5 percent to 8 percent in 2003,'' Zhang said.

Economic growth, improved business efficiency and the expiration of tax concessions enjoyed by some companies will lay a solid foundation for the country's tax revenue growth, he said.

Meanwhile, the country will continue to beef up efforts to collect tax by fighting tax evasion, he said.

Ni Hongri, a senior researcher with the State Council's Development Research Centre, said: "If there are no unexpected events such as SARS and flooding in the second half of this year, the country's tax revenue is likely to grow between 15 percent and 20 percent.''

During the first half of this year, tax revenue rose 22.4 percent compared with the same period last year to 1.03 trillion yuan (US$124 billion), accounting for 54.4 percent of the year's revenue target, official figures show.

Ni said the growth mainly came from the first quarter of this year.

During this quarter, tax revenue rose 26.6 percent compared with the same period last year to 500.7 billion yuan (US$60.3 billion).

But in June, revenue growth dropped to 8.5 percent.

"The SARS outbreak began to have both direct and indirect impacts on revenue growth,'' Ni said.

Zhang predicted SARS would cost the taxman 20 billion to 30 billion yuan (US$2.4 billion to 3.6 billion) this year.

Because of the disease, growth in the country's gross domestic product is likely to drop by 0.3 percent, he said.

This would result in an indirect loss of about 10 billion yuan (US$1.2 billion) in tax revenue, Zhang said.

Economic growth usually contributes about half of all tax revenue.

The government's efforts to reduce taxes and fees for some industries hit by the SARS will cost another 10 billion to 20 billion yuan (US$1.2 billion to 2.4 billion), Zhang said.

The Ministry of Finance and the State Administration of Taxation said taxes and fees, including business tax, levied on some industries such as tourism and hotels will be reduced or waived between May 1 and September 30.

The two departments also announced preferential income tax policies for medical workers and those who donated money or goods for the prevention of SARS.

(China Daily July 11, 2003)